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Welfare Optimised Network Access: A Monopoly Supplying an Oligopoly

Troy S. Barry

Economic Papers, 2019, vol. 38, issue 3, 208-219

Abstract: Vertical separation and imperfect competition together can make broadband communications networks, and other infrastructure monopolies, complicated to regulate. This article models a structurally separated network as an infrastructure monopoly serving a retail oligopoly, which supplies broadband access to price‐taking households. It shows the socially optimal price the monopoly can charge retailers for access may be negative or zero, depending on the shadow cost of public funds and the size of the retail oligopoly. The article then considers the distribution of costs and benefits when a non‐optimal price is charged. I use the model to compare existing and alternative access pricing policies applied to the Australian National Broadband Network.

Date: 2019
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Handle: RePEc:bla:econpa:v:38:y:2019:i:3:p:208-219